In January, Alphabet (parent company of Google) announced it stopped pursuing its plans to provide worldwide Internet service to billions of homes via solar-powered, high-altitude drones in development by its R&D division known as X. This was just one in series of abandoned projects known as “moonshots” – ambitious, sometimes far-out side projects that Alphabet was exploring as the Next Big Thing. Some of these moonshots included projects such as Google Fiber, the planned home Internet service which the company announced it was abandoning back in October 2016, and the failed Google Glass endeavor.
In 2014 Google purchased Titan Aerospace, producer of high-altitude, solar powered drones that could stay in flight for days at a time. The plan was to use these drones, in conjunction with low-altitude drones and underground fiber connections to provide Internet access to rural and other hard-to-reach areas around the world. When Google reorganized into Alphabet in 2015, the Titan division and its engineers were absorbed into X, Alphabet’s moonshot R&D division. Over the next few years it became apparent that using these solar-powered drones proved too cost-prohibitive, especially compared to other initiatives such as Project Loon and Project Wing, being pursued.
Project Wing is a drone delivery service in development that would primarily be used for logistical purposes, such as delivery of disaster relief supplies. Project Loon uses a system of high-altitude hot air balloons as relay points to create a worldwide network of Internet service. Each of these projects shows promise and are currently being pursued by the teams at X.
More important than what projects Alphabet is abandoning are the reasons why Alphabet is starting to abandon these far-flung moonshot projects. Since bringing on Ruth Porat as CFO in May of 2015, Alphabet has been focusing on becoming a leaner, more cost-effective organization that looks and operates more like a traditional Wall Street company than the more contemporary technology companies coming out of Silicon Valley these days. In essence, Alphabet now has to perform a delicate balancing act between financial discipline and innovation, which in many ways is a clash of cultures in technology companies. Projects that may have had ten years to show a viable path to profitability are now being forced to do that in half the time, or risk being abandoned or sold off.
Although this is playing more publicly with Alphabet than with other lower-profile technology companies, this seems to be the new reality in Silicon Valley. Investors are again starting to focus more on concrete business metrics such as revenues, and more importantly profit, and asking management to do the same. This is in stark contrast to how many technology companies have historically operated, often flush with cash from unrealistic speculation and little regard to how its spent or what its spent on. Going forward into 2017, I suspect that we will see other high-profile moonshot projects abandoned as other major technology companies realize that it’s in their best interest financially to do so sooner rather than later.
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